Federal Register / Vol. 86, No. 133 / Thursday, July 15, 2021 / Notices 37379 

22 15 U.S.C. 78s(b)(3)(A)(ii). 

23 17 CFR 240.19b–4(f)(2). 

24 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3The term ‘‘Trading Permit’’ means a permit 

issued by the Exchange that confers the ability to 

transact on the Exchange. See Exchange Rule 100. 

4The term ‘‘Member’’ means an individual or 

organization that is registered with the Exchange 

pursuant to Chapter II of Exchange Rules for 

purposes of trading on the Exchange as an 

‘‘Electronic Exchange Member’’ or ‘‘Market Maker.’’ 

Members are deemed ‘‘members’’ under the 

Exchange Act. See Exchange Rule 100 and the 

Definitions Section of the Fee Schedule. 

competitive environment, market 

participants are free to choose which 

competing exchange to use to satisfy 

their business needs. As a result, the 

Exchange believes this proposed rule 

change permits fair competition among 

national securities exchanges. 

Accordingly, the Exchange does not 

believe its proposed fee changes impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act,22 and Rule 

19b–4(f)(2) 23 thereunder. At any time 

within 60 days of the filing of the 

proposed rule change, the Commission 

summarily may temporarily suspend 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. If the Commission 

takes such action, the Commission shall 

institute proceedings to determine 

whether the proposed rule should be 

approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

PEARL–2021–30 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–PEARL–2021–30. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–PEARL–2021–30 and 

should be submitted on or before 

August 5, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.24

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–15033 Filed 7–14–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92366; File No. SR– 

PEARL–2021–32] 

Self-Regulatory Organizations; MIAX 

PEARL, LLC; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Amend the MIAX Pearl 

Options Fee Schedule 

July 9, 2021. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on July 1, 

2021, MIAX PEARL, LLC (‘‘MIAX Pearl’’ 

or ‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) a proposed rule change 

as described in Items I, II, and III below, 

which Items have been prepared by the 

Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange is filing a proposal to 

amend the MIAX Pearl Options Fee 

Schedule (the ‘‘Fee Schedule’’) to 

remove certain credits and amend the 

monthly Trading Permit 3 fees for 

Exchange Members.4

The text of the proposed rule change 

is available on the Exchange’s website at 

http://www.miaxoptions.com/rulefilings/pearl at MIAX Pearl’s principal 

office, and at the Commission’s Public 

Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend the 

Fee Schedule to remove certain credits 

and amend the monthly Trading Permit 

fees (‘‘Proposed Access Fees’’) for 

Exchange Members. 

Remove ‘‘Monthly Volume Credit’’ 

The Exchange proposes to amend the 

Definitions section of the Fee Schedule 

to delete the definition and remove the 

credits applicable to the Monthly 

Volume Credit for Members. The 


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37380 Federal Register / Vol. 86, No. 133 / Thursday, July 15, 2021 / Notices 

5See Securities Exchange Act Release No. 82867 

(March 13, 2018), 83 FR 12044 (March 19, 2018) 

(SR–PEARL–2018–07). 6 ‘‘Priority Customer’’ means a person or entity 

that (i) is not a broker or dealer in securities, and 

(ii) does not place more than 390 orders in listed 

options per day on average during a calendar month 

for its own beneficial accounts(s). The number of 

orders shall be counted in accordance with 

Interpretation and Policy .01 of Exchange Rule 100. 

See the Definitions Section of the Fee Schedule and 

Exchange Rule 100, including Interpretation and 

Policy .01. 

7 ‘‘FIX Interface’’ means the Financial Information 

Exchange interface for certain order types as set 

forth in Exchange Rule 516. See the Definitions 

Section of the Fee Schedule and Exchange Rule 

100. 8 ‘‘MEO Interface’’ or ‘‘MEO’’ means a binary 

order interface for certain order types as set forth 

in Rule 516 into the MIAX Pearl System. See the 

Definitions Section of the Fee Schedule and 

Exchange Rule 100. 9 ‘‘Affiliate’’ means (i) an affiliate of a Member of 

at least 75% common ownership between the firms 

as reflected on each firm’s Form BD, Schedule A, 

or (ii) the Appointed Market Maker of an Appointed 

EEM (or, conversely, the Appointed EEM of an 

Appointed Market Maker). An ‘‘Appointed Market 

Maker’’ is a MIAX Pearl Market Maker (who does 

not otherwise have a corporate affiliation based 

upon common ownership with an EEM) that has 

been appointed by an EEM and an ‘‘Appointed 

EEM’’ is an EEM (who does not otherwise have a 

corporate affiliation based upon common 

ownership with a MIAX Pearl Market Maker) that 

has been appointed by a MIAX Pearl Market Maker, 

pursuant to the following process. A MIAX Pearl 

Market Maker appoints an EEM and an EEM 

appoints a MIAX Pearl Market Maker, for the 

purposes of the Fee Schedule, by each completing 

and sending an executed Volume Aggregation 

Request Form by email to membership@

miaxoptions.com no later than 2 business days 

prior to the first business day of the month in which 

the designation is to become effective. Transmittal 

of a validly completed and executed form to the 

Exchange along with the Exchange’s 

acknowledgement of the effective designation to 

each of the Market Maker and EEM will be viewed 

as acceptance of the appointment. The Exchange 

will only recognize one designation per Member. A 

Member may make a designation not more than 

once every 12 months (from the date of its most 

recent designation), which designation shall remain 

in effect unless or until the Exchange receives 

written notice submitted 2 business days prior to 

the first business day of the month from either 

Member indicating that the appointment has been 

terminated. Designations will become operative on 

the first business day of the effective month and 

may not be terminated prior to the end of the 

month. Execution data and reports will be provided 

to both parties. See the Definitions Section of the 

Fee Schedule. 

10 ‘‘Excluded Contracts’’ means any contracts 

routed to an away market for execution. See the 

Definitions Section of the Fee Schedule. 

11 ‘‘TCV’’ means total consolidated volume 

calculated as the total national volume in those 

classes listed on MIAX Pearl for the month for 

which the fees apply, excluding consolidated 

volume executed during the period of time in 

which the Exchange experiences an Exchange 

System Disruption (solely in the option classes of 

the affected Matching Engine). See the Definitions 

Section of the Fee Schedule. 

12The term ‘‘Electronic Exchange Member’’ or 

‘‘EEM’’ means the holder of a Trading Permit who 

is a Member representing as agent Public Customer 

Orders or Non-Customer Orders on the Exchange 

and those non-Market Maker Members conducting 

proprietary trading. Electronic Exchange Members 

are deemed ‘‘members’’ under the Exchange Act. 

See the Definitions Section of the Fee Schedule. 

13The term ‘‘Market Maker’’ or ‘‘MM’’ means a 

Member registered with the Exchange for the 

purpose of making markets in options contracts 

traded on the Exchange and that is vested with the 

rights and responsibilities specified in Chapter VI 

of these Rules. See the Definitions Section of the 

Fee Schedule. 

14See the Definitions Section of the Fee Schedule 

for the monthly volume thresholds associated with 

each Tier. 

15The term ‘‘System’’ means the automated 

trading system used by the Exchange for the trading 

of securities. See Exchange Rule 100. 

Exchange established the Monthly 

Volume Credit in 2018 5 to encourage 

Members to send increased Priority 

Customer 6 order flow to the Exchange, 

which the Exchange applied to the 

assessment of certain non-transaction 

rebates and fees for that Member. The 

Exchange applies a different Monthly 

Volume Credit depending on whether 

the Member connects to the Exchange 

via the FIX Interface 7 or MEO 

Interface.8 Currently, the Exchange 

assesses the Monthly Volume Credit to 

a Member whose executed Priority 

Customer volume along with that of its 

Affiliates,9 not including Excluded 

Contracts,10 is at least 0.30% of MIAX 

Pearl-listed Total Consolidated Volume 

(‘‘TCV’’),11 as set forth in the following 

table: 

Type of member connection 

Monthly 

volume 

credit 

Member that connects via 

the FIX Interface ............... $250 

Member that connects via 

the MEO Interface ............. 1,000 

If a Member connects via both the 

MEO Interface and FIX Interface and 

qualifies for the Monthly Volume Credit 

based upon its Priority Customer 

volume, the greater Monthly Volume 

Credit shall apply to such Member. The 

Monthly Volume Credit is a single, 

once-per-month credit towards the 

aggregate monthly total of nontransaction fees assessable to a Member. 

The Exchange now proposes to amend 

the Definitions section of the Fee 

Schedule to delete the definition and 

remove the Monthly Volume Credit. The 

Exchange established the Monthly 

Volume Credit when it first launched 

operations to attract order flow by 

lowering the initial fixed cost for 

Members. The Monthly Volume Credit 

has achieved its purpose and the 

Exchange now believes it is appropriate 

to remove this credit. The Exchange 

believes that the Exchange’s existing 

Priority Customer rebates and fees will 

continue to allow the Exchange to 

remain highly competitive and continue 

to attract order flow and maintain 

market share. 

Remove Trading Permit Fee Credit 

The Exchange proposes to amend 

Section 3)b) of the Fee Schedule to 

remove the Trading Permit fee credit 

that is denoted in footnote ‘‘*’’ below 

the Trading Permit fee table. The 

Trading Permit fee credit is applicable 

to Members that connect via both the 

MEO and FIX Interfaces. Currently, 

Members who connect via both the 

MEO and FIX Interfaces are assessed the 

rates for both types of Trading Permits, 

but these Members receive a $100 

monthly credit towards the Trading 

Permit fees applicable to the MEO 

Interface use. The Exchange now 

proposes to remove the Trading Permit 

fee credit and delete footnote ‘‘*’’ from 

Section 3b) of the Fee Schedule. 

The Exchange established the Trading 

Permit fee credit when it first launched 

operations to attract order flow and 

increase membership by lowering the 

costs for Members that connect via both 

the MEO Interface and FIX Interface. 

The Trading Permit fee credit has 

achieved its purposes and the Exchange 

now believes that it is appropriate to 

remove this credit in light of the current 

operating conditions and membership 

population on the Exchange. 

Amend Trading Permit Fees 

The Exchange proposes to amend 

Section 3b) of the Fee Schedule to 

increase the amount of the monthly 

Trading Permit fees. The Exchange 

issues Trading Permits to Members who 

are either Electronic Exchange 

Members 12 (‘‘EEMs’’) or Market 

Makers.13 The Exchange assesses 

Trading Permit fees based upon the 

monthly total volume executed by the 

Member and its Affiliates on the 

Exchange across all origin types, not 

including Excluded Contracts, as 

compared to the total TCV in all MIAX 

Pearl-listed options. The Exchange 

adopted a tier-based fee structure based 

upon the volume-based tiers detailed in 

the definition of ‘‘Non-Transaction Fees 

Volume-Based Tiers’’ 14 in the 

Definitions section of the Fee Schedule. 

The Exchange also assesses Trading 

Permit fees based upon the type of 

interface used by the Member to connect 

to the Exchange—the FIX Interface and/ 

or the MEO Interface. 

Current Trading Permit Fees. 

Currently, each Member who connects 

to the System 15 via the FIX Interface is 

assessed the following monthly Trading 

Permit fees: 

(i) If its volume falls within the 

parameters of Tier 1 of the NonTransaction Fees Volume-Based Tiers, 

or volume up to 0.30%, $250; 


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16See Securities Exchange Act Release No. 82867 

(March 13, 2018), 83 FR 12044 (March 19, 2018) 

(SR–PEARL–2018–07). 

17See the MIAX Fee Schedule, Section 3)b); 

MIAX Emerald Fee Schedule, Section 3)b). 

18See e.g., NYSE Arca Options Fees and Charges, 

p.1 (assessing market makers $6,000 for up to 175 

option issues, an additional $5,000 for up to 350 

option issues, an additional $4,000 for up to 1,000 

option issues, an additional $3,000 for all option 

issues on the exchange, and an additional $1,000 

for the fifth trading permit and for each trading 

permit thereafter); NYSE American Options Fee 

Schedule, p. 23 (assessing market makers $8,000 for 

up to 60 plus the bottom 45% of option issues, an 

additional $6,000 for up to 150 plus the bottom 

45% of option issues, an additional $5,000 for up 

to 500 plus the bottom 45% of option issues, and 

additional $4,000 for up to 1,100 plus the bottom 

45% of option issues, an additional $3,000 for all 

issues traded on the exchange, and an additional 

$2,000 for 6th to 9th ATPs; plus an addition fee for 

premium products). See also Cboe BZX Options 

Exchange (‘‘BZX Options’’) assesses the Participant 

Fee, which is a membership fee, according to a 

member’s ADV. See Cboe BZX Options Exchange 

Fee Schedule under ‘‘Membership Fees’’. The 

Participant Fee is $500 if the member ADV is less 

than 5000 contracts and $1,000 if the member ADV 

is equal to or greater than 5000 contracts. Id. 

19See id. 

20 15 U.S.C. 78f(b). 

21 15 U.S.C. 78f(b)(4) and (5). 

(ii) if its volume falls within the 

parameters of Tier 2 of the NonTransaction Fees Volume-Based Tiers, 

or volume above 0.30% up to 0.60%, 

$350; and 

(iii) if its volume falls with the 

parameters of Tier 3 of the NonTransaction Fees Volume-Based Tiers, 

or volume above 0.60%, $450. 

Each Member who connects to the 

System via the MEO Interface is 

assessed the following monthly Trading 

Permit fees: 

(i) If its volume falls within the 

parameters of Tier 1 of the NonTransaction Fees Volume-Based Tiers, 

or volume up to 0.30%, $300; 

(ii) if its volume falls within the 

parameters of Tier 2 of the NonTransaction Fees Volume-Based Tiers, 

or volume above 0.30% up to 0.60%, 

$400; and 

(iii) if its volume falls with the 

parameters of Tier 3 of the NonTransaction Fees Volume-Based Tiers, 

or volume above 0.60%, $500. 

Proposed Trading Permit Fees. The 

Exchange now proposes to amend its 

Trading Permit fees as follows. Each 

Member who connects to the System via 

the FIX Interface will be assessed the 

following monthly Trading Permit fees: 

(i) If its volume falls within the 

parameters of Tier 1 of the NonTransaction Fees Volume-Based Tiers, 

$500; 

(ii) if its volume falls within the 

parameters of Tier 2 of the NonTransaction Fees Volume-Based Tiers, 

$1,000; and 

(iii) if its volume falls with the 

parameters of Tier 3 of the NonTransaction Fees Volume-Based Tiers, 

$1,500. 

Each Member who connects to the 

System via the MEO Interface will be 

assessed the following monthly Trading 

Permit fees: 

(i) If its volume falls within the 

parameters of Tier 1 of the NonTransaction Fees Volume-Based Tiers, 

$2,500; 

(ii) if its volume falls within the 

parameters of Tier 2 of the NonTransaction Fees Volume-Based Tiers, 

$4,000; and 

(iii) if its volume falls with the 

parameters of Tier 3 of the NonTransaction Fees Volume-Based Tiers, 

$6,000. 

Members who use the MEO Interface 

may also connect to the System through 

the FIX Interface as well, and vice versa. 

The Exchange notes that the Trading 

Permit fees for Members who connect 

through the MEO Interface are higher 

than the Trading Permit fees for 

Members who connect through the FIX 

Interface, since the FIX Interface utilizes 

less capacity and resources of the 

Exchange. The MEO Interface offers 

lower latency and higher throughput, 

which utilizes greater capacity and 

resources of the Exchange. The FIX 

Interface offers lower bandwidth 

requirements and an industry-wide 

uniform message format. Both EEMs and 

Market Makers may connect to the 

Exchange using either interface. 

Trading Permits grant access to the 

Exchange, thus providing the ability to 

submit orders and trade on the 

Exchange, in the manner defined in the 

relevant Trading Permit. Without a 

Trading Permit, a Member cannot 

directly trade on the Exchange. 

Therefore, a Trading Permit is a means 

to directly access the Exchange (which 

offers meaningful value), and the 

Exchange now proposes to increase its 

monthly fees since it has not done so 

since the fees were first adopted in 

2018 16 and are designed to recover a 

portion of the costs associated with 

directly accessing the Exchange. The 

Exchange notes that the its affiliates, 

Miami International Securities 

Exchange, LLC (‘‘MIAX’’) and MIAX 

Emerald, LLC (‘‘MIAX Emerald’’), 

charge a similar, fixed trading permit fee 

to certain users, and a similar, varying 

trading permit fee to other users, based 

upon the number of assignments of 

option classes or the percentage of 

volume in option classes.17 The 

Exchange notes that other options 

exchanges assess certain of their 

membership fees at different rates, 

based upon a member’s participation on 

that exchange,18 and, as such, this 

concept is not new or novel. The 

Exchange also notes that the proposed 

increased Trading Permit fees are in line 

with, or cheaper than, the trading 

permit fees or similar membership fees 

charged by other options exchanges.19

2. Statutory Basis 

The Exchange believes that its 

proposal to amend its Fee Schedule is 

consistent with Section 6(b) of the Act 20

in general, and furthers the objectives of 

Section 6(b)(4) of the Act 21 in 

particular, in that it is an equitable 

allocation of reasonable dues, fees and 

other charges among its members and 

issuers and other persons using its 

facilities. The Exchange also believes 

the proposal furthers the objectives of 

Section 6(b)(5) of the Act in that it is 

designed to promote just and equitable 

principles of trade, to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general to protect investors and the 

public interest and is not designed to 

permit unfair discrimination between 

customers, issuers, brokers and dealers. 

The Exchange believes that 

exchanges, in setting fees of all types, 

should meet very high standards of 

transparency to demonstrate why each 

new fee or fee increase meets the 

requirements of the Act that fees be 

reasonable, equitably allocated, not 

unfairly discriminatory, and not create 

an undue burden on competition among 

market participants. The Exchange 

believes this high standard is especially 

important when an exchange imposes 

various access fees for market 

participants to access an exchange’s 

marketplace. The Exchange deems 

Trading Permit fees to be Access Fees. 

It records these fees as part of its 

‘‘Access Fees’’ revenue in its financial 

statements. The Exchange believes that 

it is important to demonstrate that these 

fees are based on its costs and 

reasonable business needs. The 

Exchange believes the Proposed Access 

Fees will allow the Exchange to offset 

expenses the Exchange has and will 

incur, and that the Exchange is 

providing sufficient transparency (as 

described below) into how the Exchange 

determined to charge such fees. 

Accordingly, the Exchange is providing 

an analysis of its revenues, costs, and 

profitability associated with the 

Proposed Access Fees. This analysis 

includes information regarding its 

methodology for determining the costs 

and revenues associated with the 

Proposed Access Fees. 


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22See Securities Exchange Act Release No. 91033 

(February 1, 2021), 86 FR 8455 (February 5, 2021) 

(SR–EMERALD–2021–03) (Notice of Filing and 

Immediate Effectiveness of a Proposed Rule Change 

To Amend Its Fee Schedule To Adopt Monthly 

Trading Permit Fees). 

23See Securities Exchange Act Release No. 85459 

(March 29, 2019), 84 FR 13363 (April 4, 2019) (SR– 

BOX–2018–24, SR–BOX–2018–37, and SR–BOX– 

2019–04). 

24See Staff Guidance on SRO Rule Filings 

Relating to Fees (May 21, 2019), at https://

www.sec.gov/tm/staff-guidance-sro-rule-filings-fees 

(the ‘‘Guidance’’). 

25See ‘‘The market at a glance’’, available at 

www.miaxoptions.com (last visited June 30, 2021). 

26See supra note 22. 

In order to determine the Exchange’s 

costs to provide the access services 

associated with the Proposed Access 

Fees, the Exchange conducted an 

extensive cost review in which the 

Exchange analyzed every expense item 

in the Exchange’s general expense 

ledger to determine whether each such 

expense relates to the Proposed Access 

Fees, and, if such expense did so relate, 

what portion (or percentage) of such 

expense actually supports the access 

services. The sum of all such portions 

of expenses represents the total cost of 

the Exchange to provide the access 

services associated with the Proposed 

Access Fees. For the avoidance of doubt, 

no expense amount was allocated twice. 

The Exchange is also providing detailed 

information regarding the Exchange’s 

cost allocation methodology—namely, 

information that explains the 

Exchange’s rationale for determining 

that it was reasonable to allocate certain 

expenses described in this filing 

towards the cost to the Exchange to 

provide the access services associated 

with the Proposed Access Fees. 

In order to determine the Exchange’s 

projected revenues associated with the 

Proposed Access Fees, the Exchange 

analyzed the number of Members 

currently utilizing the Trading Permits, 

and, utilizing a recent monthly billing 

cycle representative of 2021 monthly 

revenue, extrapolated annualized 

revenue on a going-forward basis. The 

Exchange does not believe it is 

appropriate to factor into its analysis 

future revenue growth or decline into its 

projections for purposes of these 

calculations, given the uncertainty of 

such projections due to the continually 

changing access needs of market 

participants, discounts that can be 

achieved due to lower trading volume 

and vice versa, market participant 

consolidation, etc. Additionally, the 

Exchange similarly does not factor into 

its analysis future cost growth or 

decline. The Exchange is presenting its 

revenue and expense associated with 

the Proposed Access Fees in this filing 

in a manner that is consistent with how 

the Exchange presents its revenue and 

expense in its Audited Unconsolidated 

Financial Statements. The Exchange’s 

most recent Audited Unconsolidated 

Financial Statement is for 2020. 

However, since the revenue and 

expense associated with the Proposed 

Access Fees were not in place in 2020 

or for the first two quarters of 2021, the 

Exchange believes its 2020 Audited 

Unconsolidated Financial Statement is 

not useful for analyzing the 

reasonableness of the total annual 

revenue and costs associated with the 

Proposed Access Fees. Accordingly, the 

Exchange believes it is more appropriate 

to analyze the Proposed Access Fees 

utilizing its 2021 revenue and costs, as 

described herein, which utilize the same 

presentation methodology as set forth in 

the Exchange’s previously-issued 

Audited Unconsolidated Financial 

Statements. Based on this analysis, the 

Exchange believes that the Proposed 

Access Fees are fair and reasonable 

because they will not result in excessive 

pricing or supra-competitive profit 

when comparing the Exchange’s total 

annual expense associated with 

providing the services associated with 

the Proposed Access Fees versus the 

total projected annual revenue the 

Exchange will collect for providing 

those services. 

The Exchange notes that this is the 

same process utilized by the Exchange’s 

affiliate, MIAX Emerald, in a filing 

recently noticed by the Commission 

when MIAX Emerald adopted its own 

trading permit fees.22

* * * * * 

On March 29, 2019, the Commission 

issued its Order Disapproving Proposed 

Rule Changes to Amend the Fee 

Schedule on the BOX Market LLC 

Options Facility to Establish BOX 

Connectivity Fees for Participants and 

Non-Participants Who Connect to the 

BOX Network (the ‘‘BOX Order’’).23 On 

May 21, 2019, the Commission issued 

the Staff Guidance on SRO Rule Filings 

Relating to Fees.24 Accordingly, the 

Exchange believes that the Proposed 

Access Fees are consistent with the Act 

because they (i) are reasonable, 

equitably allocated, not unfairly 

discriminatory, and not an undue 

burden on competition; (ii) comply with 

the BOX Order and the Guidance; (iii) 

are supported by evidence (including 

comprehensive revenue and cost data 

and analysis) that they are fair and 

reasonable because they will not result 

in excessive pricing or supracompetitive profit; and (iv) utilize a 

cost-based justification framework that 

is substantially similar to a framework 

previously used by the Exchange, and 

its affiliates MIAX and MIAX Emerald, 

to establish or increase other nontransaction fees. Accordingly, the 

Exchange believes that the Commission 

should find that the Proposed Access 

Fees are consistent with the Act. 

* * * * * 

As of June 30, 2021, the Exchange had 

only a 5.31% market share of the U.S. 

equity options industry for the month of 

June 2021.25 The Exchange is not aware 

of any evidence that a market share of 

approximately 5–6% provides the 

Exchange with anti-competitive pricing 

power. If the Exchange were to attempt 

to establish unreasonable pricing, then 

no market participant would join or 

connect, and existing market 

participants would disconnect. 

Separately, the Exchange is not aware 

of any reason why market participants 

could not simply drop their access to an 

exchange (or not initially access an 

exchange) if an exchange were to 

establish prices for its non-transaction 

fees that, in the determination of such 

market participant, did not make 

business or economic sense for such 

market participant to access such 

exchange. No options market participant 

is required by rule, regulation, or 

competitive forces to be a Member of the 

Exchange. As evidence of the fact that 

market participants can and do drop 

their access to exchanges based on nontransaction fee pricing, R2G Services 

LLC (‘‘R2G’’) filed a comment letter after 

BOX’s proposed rule changes to 

increase its connectivity fees (SR–BOX– 

2018–24, SR–BOX–2018–37, and SR– 

BOX–2019–04). The R2G Letter stated, 

‘‘[w]hen BOX instituted a $10,000/ 

month price increase for connectivity; 

we had no choice but to terminate 

connectivity into them as well as 

terminate our market data relationship. 

The cost benefit analysis just didn’t 

make any sense for us at those new 

levels.’’ Similarly, the Exchange’s 

affiliate, MIAX Emerald, noted in a 

recent filing that once MIAX Emerald 

issued a notice that it was instituting 

Trading Permit fees, among other nontransaction fees, one Member dropped 

its access to the Exchange as a result of 

those fees.26 Accordingly, these 

examples show that if an exchange sets 

too high of a fee for connectivity and/ 

or other non-transaction fees for its 

relevant marketplace, market 

participants can choose to drop their 

access to such exchange. 

Removal of Monthly Volume Credit and 

Trading Permit Fee Credit 

The Exchange believes its proposal to 

remove the Monthly Volume Credit is 


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27See supra note 18. 

28The Exchange has not yet finalized its 2021 

year end results. 

29The percentage allocations used in this 

proposed rule change may differ from past filings 

from the Exchange or its affiliates due to, among 

other things, changes in expenses charged by thirdparties, adjustments to internal resource allocations, 

and different system architecture of the Exchange 

as compared to its affiliates. 

30For example, the Exchange previously noted 

that all third-party expense described in its prior fee 

filing was contained in the information technology 

and communication costs line item under the 

section titled ‘‘Operating Expenses Incurred 

Directly or Allocated From Parent,’’ in the 

Exchange’s 2019 Form 1 Amendment containing its 

financial statements for 2018. See Securities 

Exchange Act Release No. 87876 (December 31, 

2019), 85 FR 757 (January 7, 2020) (SR–PEARL– 

2019–36). Accordingly, the third-party expense 

described in this filing is attributed to the same line 

item for the Exchange’s 2021 Form 1 Amendment, 

which will be filed in 2022. 

reasonable, equitable and not unfairly 

discriminatory because all market 

participants will no longer be offered 

the ability to achieve the extra credits 

associated with the Monthly Volume 

Credit for submitting Priority Customer 

volume to the Exchange and access to 

the Exchange is offered on terms that are 

not unfairly discriminatory. The 

Exchange believes it is equitable and not 

unfairly discriminatory to remove the 

Monthly Volume Credit from the Fee 

Schedule for business and competitive 

reasons because, in order to attract order 

flow when the Exchange first launched 

operations, the Exchange established the 

Monthly Volume Credit to lower the 

initial fixed cost for Members. The 

Exchange now believes that it is 

appropriate to remove this credit in 

light of the current operating conditions 

and the current type and amount of 

Priority Customer volume executed on 

the Exchange. The Exchange believes 

that the Exchange’s Priority Customer 

rebates and fees will still allow the 

Exchange to remain highly competitive 

such that the Exchange should continue 

to attract order flow and maintain 

market share. 

The Exchange believes its proposal to 

remove the Trading Permit fee credit for 

Members that connect via both the MEO 

Interface and FIX Interface is 

reasonable, equitable and not unfairly 

discriminatory because all market 

participants will no longer be offered 

the ability to receive the credit and 

access to the Exchange is offered on 

terms that are not unfairly 

discriminatory. The Exchange believes 

it is equitable and not unfairly 

discriminatory to remove the Trading 

Permit fee credit for business and 

competitive reasons because, in order to 

attract order flow and membership after 

the Exchange first launched operations, 

the Exchange established the Trading 

Permit fee credit to lower the costs for 

Members that connect via both the MEO 

Interface and FIX Interface. The 

Exchange now believes that it is 

appropriate to remove this credit in 

light of the current operating conditions 

and membership on the Exchange. 

Trading Permit Fee Increase 

The Exchange believes that its 

proposal is consistent with Section 

6(b)(4) of the Act because the Proposed 

Access Fees will not result in excessive 

pricing or supra-competitive profit. The 

Proposed Access Fees are also 

reasonable and equitable because they 

are in line with, or cheaper than, the 

trading permit fees or similar 

membership fees charged by other 

options exchanges.27 The costs 

associated with providing access to 

Exchange Members and non-Members, 

as well as the general expansion of a 

state-of-the-art infrastructure, are 

extensive, have increased year-overyear, and are projected to increase yearover-year in the future. 

The Exchange’s high performance 

network solutions and supporting 

infrastructure (including employee 

support), provides unparalleled system 

throughput and the capacity to handle 

approximately 10.7 million order 

messages per second. On an average 

day, the Exchange handles over 

approximately 2.7 billion total 

messages. However, in order to achieve 

a consistent, premium network 

performance, the Exchange must build 

out and maintain a network that has the 

capacity to handle the message rate 

requirements of its most heavy network 

consumers. These billions of messages 

per day consume the Exchange’s 

resources and significantly contribute to 

the overall expense for storage and 

network transport capabilities. 

In order to provide more detail and to 

quantify the Exchange’s costs associated 

with providing access to the Exchange 

in general, the Exchange notes that there 

are material costs associated with 

providing the infrastructure and 

headcount to fully-support access to the 

Exchange. The Exchange incurs 

technology expense related to 

establishing and maintaining 

Information Security services, enhanced 

network monitoring and customer 

reporting, as well as Regulation SCI 

mandated processes, associated with its 

network technology. While some of the 

expense is fixed, much of the expense 

is not fixed, and thus increases as the 

services associated with the Proposed 

Access Fees increase. For example, new 

Members to the Exchange may require 

the purchase of additional hardware to 

support those Members as well as 

enhanced monitoring and reporting of 

customer performance that the 

Exchange and its affiliates provide. 

Further, as the total number of Members 

increases, the Exchange and its affiliates 

may need to increase their data center 

footprint and consume more power, 

resulting in increased costs charged by 

their third-party data center provider. 

Accordingly, the cost to the Exchange 

and its affiliates to provide access to its 

Members is not fixed. The Exchange 

believes the Proposed Access Fees are 

reasonable in order to offset a portion of 

the costs to the Exchange associated 

with providing access to its network 

infrastructure. 

The Exchange only has four primary 

sources of revenue: Transaction fees, 

access fees (which includes the 

Proposed Access Fees), regulatory fees, 

and market data fees. Accordingly, the 

Exchange must cover all of its expenses 

from these four primary sources of 

revenue. 

The Exchange believes that the 

Proposed Access Fees are fair and 

reasonable because they will not result 

in excessive pricing or supracompetitive profit, when comparing the 

total annual expense that the Exchange 

projects to incur in connection with 

providing these access services versus 

the total annual revenue that the 

Exchange projects to collect in 

connection with services associated 

with the Proposed Access Fees. For 

2021,28 the total annual expense for 

providing the access services associated 

with the Proposed Access Fees for the 

Exchange is projected to be 

approximately $844,741. The $844,741 

in projected total annual expense is 

comprised of the following, all of which 

are directly related to the access services 

associated with the Proposed Access 

Fees: (1) Third-party expense, relating to 

fees paid by the Exchange to thirdparties for certain products and services; 

and (2) internal expense, relating to the 

internal costs of the Exchange to 

provide the services associated with the 

Proposed Access Fees.29 As noted 

above, the Exchange believes it is more 

appropriate to analyze the Proposed 

Access Fees utilizing its 2021 revenue 

and costs, which utilize the same 

presentation methodology as set forth in 

the Exchange’s previously-issued 

Audited Unconsolidated Financial 

Statements.30 The $844,741 in projected 

total annual expense is directly related 

to the access services associated with 

the Proposed Access Fees, and not any 

other product or service offered by the 

Exchange. It does not include general 


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31 In fact, on October 22, 2019, the Exchange was 

notified by SFTI that it is again raising its fees 

charged to the Exchange by approximately 11%, 

without having to show that such fee change 

complies with the Act by being reasonable, 

equitably allocated, and not unfairly 

discriminatory. It is unfathomable to the Exchange 

that, given the critical nature of the infrastructure 

services provided by SFTI, that its fees are not 

required to be rule-filed with the Commission 

pursuant to Section 19(b)(1) of the Act and Rule 

19b–4 thereunder. See 15 U.S.C. 78s(b)(1) and 17 

CFR 240.19b–4, respectively. 

costs of operating matching systems and 

other trading technology, and no 

expense amount was allocated twice. 

As discussed, the Exchange 

conducted an extensive cost review in 

which the Exchange analyzed every 

expense item in the Exchange’s general 

expense ledger (this includes over 150 

separate and distinct expense items) to 

determine whether each such expense 

relates to the access services associated 

with the Proposed Access Fees, and, if 

such expense did so relate, what portion 

(or percentage) of such expense actually 

supports those services, and thus bears 

a relationship that is, ‘‘in nature and 

closeness,’’ directly related to those 

services. The sum of all such portions 

of expenses represents the total cost of 

the Exchange to provide access services 

associated with the Proposed Access 

Fees. 

For 2021, total third-party expense, 

relating to fees paid by the Exchange to 

third-parties for certain products and 

services for the Exchange to be able to 

provide the access services associated 

with the Proposed Access Fees, is 

projected to be $188,815. This includes, 

but is not limited to, a portion of the 

fees paid to: (1) Equinix, for data center 

services, for the primary, secondary, and 

disaster recovery locations of the 

Exchange’s trading system 

infrastructure; (2) Zayo Group Holdings, 

Inc. (‘‘Zayo’’) for network services (fiber 

and bandwidth products and services) 

linking the Exchange’s office locations 

in Princeton, New Jersey and Miami, 

Florida, to all data center locations; (3) 

Secure Financial Transaction 

Infrastructure (‘‘SFTI’’),31 which 

supports connectivity and feeds for the 

entire U.S. options industry; (4) various 

other services providers (including 

Thompson Reuters, NYSE, Nasdaq, and 

Internap), which provide content, 

connectivity services, and infrastructure 

services for critical components of 

options connectivity and network 

services; and (5) various other hardware 

and software providers (including Dell 

and Cisco, which support the 

production environment in which 

Members connect to the network to 

trade, receive market data, etc.). 

For clarity, only a portion of all fees 

paid to such third-parties is included in 

the third-party expense herein, and no 

expense amount is allocated twice. 

Accordingly, the Exchange does not 

allocate its entire information 

technology and communication costs to 

the access services associated with the 

Proposed Access Fees. Further, the 

Exchange notes that, with respect to the 

MIAX Pearl expenses included herein, 

those expenses only cover the MIAX 

Pearl options market; expenses 

associated with the MIAX Pearl equities 

market are accounted for separately and 

are not included within the scope of this 

filing. 

The Exchange believes it is reasonable 

to allocate such third-party expense 

described above towards the total cost to 

the Exchange to provide the access 

services associated with the Proposed 

Access Fees. In particular, the Exchange 

believes it is reasonable to allocate the 

identified portion of the Equinix 

expense because Equinix operates the 

data centers (primary, secondary, and 

disaster recovery) that host the 

Exchange’s network infrastructure. This 

includes, among other things, the 

necessary storage space, which 

continues to expand and increase in 

cost, power to operate the network 

infrastructure, and cooling apparatuses 

to ensure the Exchange’s network 

infrastructure maintains stability. 

Without these services from Equinix, 

the Exchange would not be able to 

operate and support the network and 

provide the access services associated 

with the Proposed Access Fees to its 

Members and their customers. The 

Exchange did not allocate all of the 

Equinix expense toward the cost of 

providing the access services associated 

with the Proposed Access Fees, only 

that portion which the Exchange 

identified as being specifically mapped 

to providing the access services 

associated with the Proposed Access 

Fees, approximately 8% of the total 

applicable Equinix expense. The 

Exchange believes this allocation is 

reasonable because it represents the 

Exchange’s actual cost to provide the 

access services associated with the 

Proposed Access Fees, and not any 

other service, as supported by its cost 

review. 

The Exchange believes it is reasonable 

to allocate the identified portion of the 

Zayo expense because Zayo provides 

the internet, fiber and bandwidth 

connections with respect to the 

network, linking the Exchange with its 

affiliates, MIAX and MIAX Emerald, as 

well as the data center and disaster 

recovery locations. As such, all of the 

trade data, including the billions of 

messages each day per exchange, flow 

through Zayo’s infrastructure over the 

Exchange’s network. Without these 

services from Zayo, the Exchange would 

not be able to operate and support the 

network and provide the access services 

associated with the Proposed Access 

Fees. The Exchange did not allocate all 

of the Zayo expense toward the cost of 

providing the access services associated 

with the Proposed Access Fees, only the 

portion which the Exchange identified 

as being specifically mapped to 

providing the Proposed Access Fees, 

approximately 4% of the total 

applicable Zayo expense. The Exchange 

believes this allocation is reasonable 

because it represents the Exchange’s 

actual cost to provide the access 

services associated with the Proposed 

Access Fees, and not any other service, 

as supported by its cost review. 

The Exchange believes it is reasonable 

to allocate the identified portions of the 

SFTI expense and various other service 

providers’ (including Thompson 

Reuters, NYSE, Nasdaq, and Internap) 

expense because those entities provide 

connectivity and feeds for the entire 

U.S. options industry, as well as the 

content, connectivity services, and 

infrastructure services for critical 

components of the network. Without 

these services from SFTI and various 

other service providers, the Exchange 

would not be able to operate and 

support the network and provide access 

to its Members and their customers. The 

Exchange did not allocate all of the SFTI 

and other service providers’ expense 

toward the cost of providing the access 

services associated with the Proposed 

Access Fees, only the portions which 

the Exchange identified as being 

specifically mapped to providing the 

access services associated with the 

Proposed Access Fees, approximately 

3% of the total applicable SFTI and 

other service providers’ expense. The 

Exchange believes this allocation is 

reasonable because it represents the 

Exchange’s actual cost to provide the 

access services associated with the 

Proposed Access Fees. 

The Exchange believes it is reasonable 

to allocate the identified portion of the 

other hardware and software provider 

expense because this includes costs for 

dedicated hardware licenses for 

switches and servers, as well as 

dedicated software licenses for security 

monitoring and reporting across the 

network. Without this hardware and 

software, the Exchange would not be 

able to operate and support the network 

and provide access to its Members and 

their customers. The Exchange did not 

allocate all of the hardware and software 

provider expense toward the cost of 


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providing the access services associated 

with the Proposed Access Fees, only the 

portions which the Exchange identified 

as being specifically mapped to 

providing the access services associated 

with the Proposed Access Fees, 

approximately 5% of the total 

applicable hardware and software 

provider expense. The Exchange 

believes this allocation is reasonable 

because it represents the Exchange’s 

actual cost to provide the access 

services associated with the Proposed 

Access Fees. 

For 2021, total projected internal 

expense, relating to the internal costs of 

the Exchange to provide the access 

services associated with the Proposed 

Access Fees, is projected to be $655,925. 

This includes, but is not limited to, 

costs associated with: (1) Employee 

compensation and benefits for full-time 

employees that support the access 

services associated with the Proposed 

Access Fees, including staff in network 

operations, trading operations, 

development, system operations, 

business, as well as staff in general 

corporate departments (such as legal, 

regulatory, and finance) that support 

those employees and functions 

(including an increase as a result of the 

higher determinism project); (2) 

depreciation and amortization of 

hardware and software used to provide 

the access services associated with the 

Proposed Access Fees, including 

equipment, servers, cabling, purchased 

software and internally developed 

software used in the production 

environment to support the network for 

trading; and (3) occupancy costs for 

leased office space for staff that provide 

the access services associated with the 

Proposed Access Fees. The breakdown 

of these costs is more fully-described 

below. For clarity, only a portion of all 

such internal expenses are included in 

the internal expense herein, and no 

expense amount is allocated twice. 

Accordingly, the Exchange does not 

allocate its entire costs contained in 

those items to the access services 

associated with the Proposed Access 

Fees. 

The Exchange believes it is reasonable 

to allocate such internal expense 

described above towards the total cost to 

the Exchange to provide the access 

services associated with the Proposed 

Access Fees. In particular, the 

Exchange’s employee compensation and 

benefits expense relating to providing 

the access services associated with the 

Proposed Access Fees is projected to be 

$549,834, which is only a portion of the 

$9,163,894 total projected expense for 

employee compensation and benefits. 

The Exchange believes it is reasonable 

to allocate the identified portion of such 

expense because this includes the time 

spent by employees of several 

departments, including Technology, 

Back Office, Systems Operations, 

Networking, Business Strategy 

Development (who create the business 

requirement documents that the 

Technology staff use to develop network 

features and enhancements), Trade 

Operations, Finance (who provide 

billing and accounting services relating 

to the network), and Legal (who provide 

legal services relating to the network, 

such as rule filings and various license 

agreements and other contracts). As part 

of the extensive cost review conducted 

by the Exchange, the Exchange reviewed 

the amount of time spent by each 

employee on matters relating to the 

provision of access services associated 

with the Proposed Access Fees. Without 

these employees, the Exchange would 

not be able to provide the access 

services associated with the Proposed 

Access Fees to its Members and their 

customers. The Exchange did not 

allocate all of the employee 

compensation and benefits expense 

toward the cost of the access services 

associated with the Proposed Access 

Fees, only the portions which the 

Exchange identified as being 

specifically mapped to providing the 

access services associated with the 

Proposed Access Fees, approximately 

6% of the total applicable employee 

compensation and benefits expense. The 

Exchange believes this allocation is 

reasonable because it represents the 

Exchange’s actual cost to provide the 

access services associated with the 

Proposed Access Fees, and not any 

other service, as supported by its cost 

review. 

The Exchange’s depreciation and 

amortization expense relating to 

providing the access services associated 

with the Proposed Access Fees is 

projected to be $66,316, which is only 

a portion of the $1,326,325 total 

projected expense for depreciation and 

amortization. The Exchange believes it 

is reasonable to allocate the identified 

portion of such expense because such 

expense includes the actual cost of the 

computer equipment, such as dedicated 

servers, computers, laptops, monitors, 

information security appliances and 

storage, and network switching 

infrastructure equipment, including 

switches and taps that were purchased 

to operate and support the network and 

provide the access services associated 

with the Proposed Access Fees. Without 

this equipment, the Exchange would not 

be able to operate the network and 

provide the access services associated 

with the Proposed Access Fees to its 

Members and their customers. The 

Exchange did not allocate all of the 

depreciation and amortization expense 

toward the cost of providing the access 

services associated with the Proposed 

Access Fees, only the portion which the 

Exchange identified as being 

specifically mapped to providing the 

access services associated with the 

Proposed Access Fees, approximately 

5% of the total applicable depreciation 

and amortization expense, as these 

access services would not be possible 

without relying on such. The Exchange 

believes this allocation is reasonable 

because it represents the Exchange’s 

actual cost to provide the access 

services associated with the Proposed 

Access Fees, and not any other service, 

as supported by its cost review. 

The Exchange’s occupancy expense 

relating to providing the access services 

associated with the Proposed Access 

Fees is projected to be $39,775, which 

is only a portion of the $497,180 total 

projected expense for occupancy. The 

Exchange believes it is reasonable to 

allocate the identified portion of such 

expense because such expense 

represents the portion of the Exchange’s 

cost to rent and maintain a physical 

location for the Exchange’s staff who 

operate and support the network, 

including providing the access services 

associated with the Proposed Access 

Fees. This amount consists primarily of 

rent for the Exchange’s Princeton, NJ 

office, as well as various related costs, 

such as physical security, property 

management fees, property taxes, and 

utilities. The Exchange operates its 

Network Operations Center (‘‘NOC’’) 

and Security Operations Center (‘‘SOC’’) 

from its Princeton, New Jersey office 

location. A centralized office space is 

required to house the staff that operates 

and supports the network. The 

Exchange currently has approximately 

150 employees. Approximately twothirds of the Exchange’s staff are in the 

Technology department, and the 

majority of those staff have some role in 

the operation and performance of the 

access services associated with the 

proposed Trading Permit fees. Without 

this office space, the Exchange would 

not be able to operate and support the 

network and provide the access services 

associated with the Proposed Access 

Fees to its Members and their 

customers. Accordingly, the Exchange 

believes it is reasonable to allocate the 

identified portion of its occupancy 

expense because such amount 

represents the Exchange’s actual cost to 

house the equipment and personnel 

who operate and support the Exchange’s 


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32See Staff Guidance on SRO Rule Filings 

Relating to Fees (May 21, 2019), at https://

www.sec.gov/tm/staff-guidance-sro-rule-filings-fees 

(the ‘‘Guidance’’). 

33See id. 

34See PHLX Form 1, Exhibit D, filed June 30, 

2020 available at https://sec.report/Document/ 

9999999997-20-003902/. 

35See https://www.theocc.com/Market-Data/ 

Market-Data-Reports/Volume-and-Open-Interest/ 

Volume-by-Exchange. 

36See Nasdaq ISE LLC Options 7 Pricing 

Schedule, Section 8.A. Access Services, at https:// 

listingcenter.nasdaq.com/rulebook/ise/rules/ 

ISE%20Options%207. 

37See ISE Form 1, filed June 29, 2020 available 

at Form 1—ISE—Final (1).pdf (sec.gov). 

38See supra note 33. 

39See Nasdaq PHLX Options 7 Pricing Schedule, 

Section 8.A. Permit and Registration Fees, at 

https://listingcenter.nasdaq.com/rulebook/phlx/ 

rules/Phlx%20Options%207. 

network infrastructure and the access 

services associated with the Proposed 

Access Fees. The Exchange did not 

allocate all of the occupancy expense 

toward the cost of providing the access 

services associated with the Proposed 

Access Fees, only the portion which the 

Exchange identified as being 

specifically mapped to operating and 

supporting the network, approximately 

8% of the total applicable occupancy 

expense. The Exchange believes this 

allocation is reasonable because it 

represents the Exchange’s cost to 

provide the access services associated 

with the Proposed Access Fees, and not 

any other service, as supported by its 

cost review. 

The Exchange notes that a material 

portion of its total overall expense is 

allocated to the provision of access 

services (including connectivity, ports, 

and trading permits). The Exchange 

believes this is reasonable and in line, 

as the Exchange operates a technologybased business that differentiates itself 

from its competitors based on its trading 

systems that rely on access to a high 

performance network, resulting in 

significant technology expense. Over 

two-thirds of Exchange staff are 

technology-related employees. The 

majority of the Exchange’s expense is 

technology-based. As described above, 

the Exchange has only four primary 

sources of fees to recover its costs, thus 

the Exchange believes it is reasonable to 

allocate a material portion of its total 

overall expense towards access fees. 

Accordingly, based on the facts and 

circumstances presented, the Exchange 

believes that its provision of the access 

services associated with the Proposed 

Access Fees will not result in excessive 

pricing or supra-competitive profit. To 

illustrate, on a going-forward, fullyannualized basis, the Exchange projects 

that its annualized revenue for 

providing the access services associated 

with the Proposed Access Fees would 

be approximately $1,170,000 per 

annum, based on a recent billing cycle. 

The Exchange projects that its 

annualized expense for providing the 

access services associated with the 

Proposed Access Fees would be 

approximately $844,741 per annum. 

Accordingly, on a fully-annualized 

basis, the Exchange believes its total 

projected revenue for providing the 

access services associated with the 

Proposed Access Fees will not result in 

excessive pricing or supra-competitive 

profit, as the Exchange will make only 

a 28% profit margin on the Proposed 

Access Fees ($1,170,000 in revenue 

minus $844,741 in expense = $325,259 

profit per annum). The Exchange notes 

that the fees charged for Trading Permits 

can vary from month to month 

depending on the type of interface used 

and the Non-Transaction Fees VolumeBased Tier that is achieved for that 

month. As such, the revenue projection 

is not a static number, with monthly 

Trading Permit fees likely to fluctuate 

month to month. 

For the avoidance of doubt, none of 

the expenses included herein relating to 

the access services associated with the 

Proposed Access Fees relate to the 

provision of any other services offered 

by the Exchange. Stated differently, no 

expense amount of the Exchange is 

allocated twice. The Exchange notes 

that, with respect to the MIAX Pearl 

expenses included herein, those 

expenses only cover the MIAX Pearl 

options market; expenses associated 

with the MIAX Pearl equities market 

and the Exchange’s affiliate exchanges, 

MIAX and MIAX Emerald, are 

accounted for separately and are not 

included within the scope of this filing. 

Stated differently, no expense amount of 

the Exchange is also allocated to MIAX 

Pearl Equites, MIAX or MIAX Emerald. 

The Exchange believes it is 

reasonable, equitable and not unfairly 

discriminatory to allocate the respective 

percentages of each expense category 

described above towards the total cost to 

the Exchange of operating and 

supporting the network, including 

providing the access services associated 

with the Proposed Access Fees because 

the Exchange performed a line-by-line 

item analysis of all the expenses of the 

Exchange, and has determined the 

expenses that directly relate to 

providing access to the Exchange. 

Further, the Exchange notes that, 

without the specific third-party and 

internal items listed above, the 

Exchange would not be able to provide 

the access services associated with the 

Proposed Access Fees to its Members 

and their customers. Each of these 

expense items, including physical 

hardware, software, employee 

compensation and benefits, occupancy 

costs, and the depreciation and 

amortization of equipment, have been 

identified through a line-by-line item 

analysis to be integral to providing 

access services. The Proposed Access 

Fees are intended to recover the 

Exchange’s costs of providing access to 

Exchange Systems. Accordingly, the 

Exchange believes that the Proposed 

Access Fees are fair and reasonable 

because they do not result in excessive 

pricing or supra-competitive profit, 

when comparing the actual costs to the 

Exchange versus the projected annual 

revenue from the Proposed Access Fees. 

The Exchange believes the proposed 

changes are reasonable, equitably 

allocated and not unfairly 

discriminatory, and do not result in a 

‘‘supra-competitive’’ 32 profit. Of note, 

the Guidance defines ‘‘supracompetitive profit’’ as profits that 

exceed the profits that can be obtained 

in a competitive market.33 With the 

proposed changes, the Exchange 

anticipates it will have a profit margin 

of 28% for its Trading Permit fees. 

Based on the 2019 Audited Financial 

Statements of the competing options 

exchanges (since the 2020 Audited 

Financial Statements will likely not 

become publicly available until early 

July 2021, after the Exchange has 

submitted this filing), the Exchange’s 

profit margin is well below the 

operating profit margins of other 

competing exchanges. For example, 

Nasdaq ISE, LLC’s (‘‘ISE’’) operating 

profit margin, for all of 2019, was 

83%.34 ISE’s equity options market 

share for all of 2019 was 8.99%35 while 

its access fees are as follows: $500 per 

month for Electronic Access Members; 

$5,000 per month for Primary Market 

Makers; and $2,500 per month for 

Competitive Market Makers.36 Nasdaq 

PHLX LLC’s (‘‘PHLX’’) operating profit 

margin, for all of 2019, was 67%.37

PHLX’s equity options market share for 

all of 2019 was 15.85%38 while its 

permit fees are as follows: $4,000 per 

month for Floor Brokers; $6,000 per 

month for Floor Lead Market Makers 

and Floor Market Makers; and $4,000 

per month for Remote Lead Market 

Makers and Remote Market Makers.39

The Exchange further believes its 

proposed fees are reasonable, equitably 

allocated and not unfairly 

discriminatory because the Exchange, 

and its affiliates, are still recouping the 

initial expenditures from building out 

their systems while the legacy 

exchanges have already paid for and 

built their systems. 


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Federal Register / Vol. 86, No. 133 / Thursday, July 15, 2021 / Notices 37387 

40See supra note 18. 

41See e.g., Phlx and ISE Rules, General Equity 

and Options Rules, General 8, Section 1(b). Phlx 

and ISE each charge a monthly fee of $2,500 for 

each 1Gb connection, $10,000 for each 10Gb 

connection and $15,000 for each 10Gb Ultra 

connection, which the equivalent of the Exchange’s 

10Gb ULL connection. See also NYSE American 

Fee Schedule, Section V.B, and Arca Fees and 

Charges, Co-Location Fees. NYSE American and 

Arca each charge a monthly fee of $5,000 for each 

1Gb circuit, $14,000 for each 10Gb circuit and 

$22,000 for each 10Gb LX circuit, which the 

equivalent of the Exchange’s 10Gb ULL connection. 

42See https://markets.cboe.com/us/options/ 

market_statistics/. 

43See Exchange Rule 210. The Sponsored User is 

subject to the fees, if any, of the Sponsoring 

Member. The Exchange notes that the Sponsoring 

Member is not required to publicize, let alone 

justify or file with the Commission its fees, and as 

such could charge the Sponsored User any fees it 

deems appropriate, even if such fees would 

otherwise be considered supra-competitive, or 

otherwise potentially unreasonable or 

uncompetitive. 

44See Securities Exchange Act Release No. 90333 

(November 4, 2020), 85 FR 71666 (November 10, 

2020) (SR–CBOE–2020–105) (the ‘‘Cboe Fee 

Filing’’). The Cboe Fee Filing cited to the October 

2020 Active Broker Dealer Report, provided by the 

Commission’s Office of Managing Executive, on 

October 8, 2020. 

45 Id. 

The Exchange believes that the 

Proposed Access Fees are reasonable, 

equitable and not unfairly 

discriminatory because they are in line 

with, or cheaper than, the trading 

permit fees or similar membership fees 

charged by other options exchanges.40

The Proposed Access Fees are fair and 

equitable and not unreasonably 

discriminatory because they apply 

equally to all Members regardless of 

type and access to the Exchange is 

offered on terms that are not unfairly 

discriminatory. The Exchange designed 

the fee rates in order to provide 

objective criteria for Trading Permit 

holders that connect via the MEO 

Interface of different sizes and business 

models that best matches their activity 

on the Exchange. 

Finally, the Exchange notes that it 

operates in a highly competitive market 

in which market participants can 

readily favor competing venues if they 

deem fee levels at a particular venue to 

be excessive. In such an environment, 

the Exchange must continually adjust its 

fees for services and products, in 

addition to order flow, to remain 

competitive with other exchanges. The 

Exchange believes that the proposed 

changes reflect this competitive 

environment. 

The Guidance provides that in 

determining whether a proposed fee is 

constrained by significant competitive 

forces, the Commission will consider 

whether there are reasonable substitutes 

for the product or service that is the 

subject of a proposed fee. As described 

below, the Exchange believes substitute 

products and services are available to 

market participants, including, among 

other things, other options exchanges 

that market participants may connect to 

in lieu of the Exchange, indirect 

connectivity to the Exchange via a thirdparty reseller and/or trading of any 

options products, including proprietary 

products, in the Over-the-Counter 

(‘‘OTC’’) markets. Indeed, there are 

currently 16 registered options 

exchanges that trade options, some of 

which have similar or lower 

connectivity fees.41 Based on publicly 

available information, no single options 

exchange has more than approximately 

14–15% of the market share as of June 

30, 2021.42

There is also no regulatory 

requirement that any market participant 

connect to any one options exchange, 

that any market participant connect at a 

particular connection speed or act in a 

particular capacity on the Exchange, or 

trade any particular product offered on 

an exchange. Moreover, membership is 

not a requirement to participate on the 

Exchange. A market participant may 

submit orders to the Exchange via a 

Sponsored User.43 Indeed, the Exchange 

is unaware of any one options exchange 

whose membership includes every 

registered broker-dealer. Based on a 

recent analysis conducted by the Cboe 

Exchange, Inc. (‘‘Cboe’’), as of October 

21, 2020, only three (3) of the brokerdealers, out of approximately 250 

broker-dealers, were members of at least 

one exchange that lists options for 

trading and were members of all 16 

options exchanges.44 Additionally, the 

Cboe Fee Filing found that several 

broker-dealers were members of only a 

single exchange that lists options for 

trading and that the number of members 

at each exchange that trades options 

varies greatly.45

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

Intra-Market Competition 

The Exchange believes that the 

Proposed Access Fees do not place 

certain market participants at a relative 

disadvantage to other market 

participants because the Proposed 

Access Fees do not favor certain 

categories of market participants in a 

manner that would impose a burden on 

competition; rather, the fee rates are 

designed in order to provide objective 

criteria for users that connect via the 

MEO Interface of different sizes and 

business models that best matches their 

activity on the Exchange. 

The Exchange believes the removal of 

the Monthly Volume Credit and Trading 

Permit fee credit will not place certain 

market participants at a relative 

disadvantage to other market 

participants because, in order to attract 

order flow when the Exchange first 

launched operations, the Exchange 

established these credits to lower the 

initial fixed cost for Members. The 

Exchange now believes that it is 

appropriate to remove this credit in 

light of the current operating conditions, 

including the Exchange’s overall 

membership and the current type and 

amount of volume executed on the 

Exchange. The Exchange believes that 

the Exchange’s rebates and fees will still 

allow the Exchange to remain highly 

competitive such that the Exchange 

should continue to attract order flow 

and maintain market share. 

Inter-Market Competition 

The Exchange believes the Proposed 

Access Fees do not place an undue 

burden on competition on other options 

exchanges that is not necessary or 

appropriate. In particular, options 

market participants are not forced to 

become members of all options 

exchanges. The Exchange notes that it 

has far less Members as compared to the 

much greater number of members at 

other options exchanges. There are a 

number of large users that connect via 

the MEO Interface and broker-dealers 

that are members of other options 

exchange but not Members of the 

Exchange. The Exchange is also 

unaware of any assertion that its 

existing fee levels or the Proposed 

Access Fees would somehow unduly 

impair its competition with other 

options exchanges. To the contrary, if 

the fees charged are deemed too high by 

market participants, they can simply 

discontinue their membership with the 

Exchange. 

The Exchange operates in a highly 

competitive market in which market 

participants can readily favor one of the 

15 competing options venues if they 

deem fee levels at a particular venue to 

be excessive. Based on publiclyavailable information, and excluding 

index-based options, no single exchange 

has more than 16% market share. 

Therefore, no exchange possesses 

significant pricing power in the 

execution of multiply-listed equity and 

ETF options order flow. As of June 30, 

2021, the Exchange had a market share 

of approximately 5.31% of executed 


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37388 Federal Register / Vol. 86, No. 133 / Thursday, July 15, 2021 / Notices 

46See supra note 25. 47 15 U.S.C. 78s(b)(3)(A)(ii). 48 17 CFR 240.19b–4(f)(2). 

49 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 ‘‘Market Maker’’ means a Member registered 

with the Exchange for the purpose of making 

markets in options contracts traded on the 

Exchange and that is vested with the rights and 

responsibilities specified in Chapter VI of Exchange 

Rules. See the Definitions Section of the Fee 

Schedule. 

multiply-listed equity options 46 for the 

month of June 2021, and the Exchange 

believes that the ever-shifting market 

share among exchanges from month to 

month demonstrates that market 

participants can discontinue or reduce 

use of certain categories of products, or 

shift order flow, in response to fee 

changes. In such an environment, the 

Exchange must continually adjust its 

fees to remain competitive with other 

exchanges and to attract order flow to 

the Exchange. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act,47 and Rule 

19b–4(f)(2) 48 thereunder. At any time 

within 60 days of the filing of the 

proposed rule change, the Commission 

summarily may temporarily suspend 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. If the Commission 

takes such action, the Commission shall 

institute proceedings to determine 

whether the proposed rule should be 

approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

PEARL–2021–32 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–PEARL–2021–32. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–PEARL–2021–32 and 

should be submitted on or before 

August 5, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.49

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–15036 Filed 7–14–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92367; File No. SR– 

PEARL–2021–31] 

Self-Regulatory Organizations; MIAX 

PEARL, LLC; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change by MIAX PEARL, LLC To 

Amend the MIAX Pearl Options Fee 

Schedule 

July 9, 2021. 

Pursuant to the provisions of Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 notice is hereby given that 

on July 1, 2021, MIAX PEARL, LLC 

(‘‘MIAX Pearl’’ or ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) a 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the Exchange. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange is filing a proposal to 

amend the MIAX Pearl Options Fee 

Schedule (the ‘‘Fee Schedule’’). 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://www.miaxoptions.com/rulefilings/pearl at MIAX Pearl’s principal 

office, and at the Commission’s Public 

Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend the 

Add/Remove Tiered Rebates/Fees set 

forth in Section 1)a) of the Fee Schedule 

that apply to the MIAX Pearl Market 

Maker 3 Origin, to modify the volume 

threshold for the alternative Volume 

Criteria in Tier 3. 

Background 

The Exchange currently assesses 

transaction rebates and fees to all 

market participants which are based 

upon the total monthly volume 


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